$40 Billion at Stake as Congress Takes up Swipe Fees

Hearings begin in Washington on the bill that proposes the reversal of Dodd-Frank, including the Durbin amendment that has had a significant impact on the debit market. As an article on NRF.com explained:

The hearing will address the Financial Choice Act, a bill sponsored by committee Chairman Jeb Hensarling, R-Texas, that would reverse the Dodd-Frank Wall Street Reform and Consumer Protection Act. Passed in 2010, Dodd-Frank was landmark legislation that tightened banking regulation in an attempt to avoid a repeat of the financial industry crisis of 2007-2008 that led to bank closings and bailouts during the Great Recession.

The National Retail Federation is understandably not supportive of Durbin’s repeal and its cap on debit interchange:

“Debit reform has been settled law for the better part of a decade,” NRF Vice President and General Counsel Mallory Duncan said in an op-ed published in the Daily Caller. “Repeal would bring back the monumental unfairness of the rigged, uncompetitive market that existed before debit reform was enacted.”

If Durbin is repealed, I believe that the impact to debit interchange will be small. The merchant community would react strongly to any significant increases and I suspect would support efforts to move rates for debit as well as credit downward. Not wanting to attract that attention, debit rates most likely will not change. The release from the requirement to have two unaffiliated debit networks, also a requirement of the Durbin amendment, could be a much larger impact to the industry. Issuers could choose to support only one network which would change how debit transactions are routed.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group